[LETTERHEARD OF
 WIEN & MALKIN LLP]

                                                 

                                                         April 1, 1998



       TO PARTICIPANTS IN EMPIRE STATE BUILDING ASSOCIATES
            Federal Identification Number 13-6084254      


            We enclose the annual report of Empire State Building
       Associates for the year ended December 31, 1997 and the
       comparative statement of operations under the sublease for the
       years 1997 and 1996.  

            The sublease provides for the payment of additional rent
       equal to 50% of the sublessee's profit in excess of $1,000,000.
       The profit for 1997 was $5,802,601, so that the sublessee paid
       additional rent of $2,401,300.  No additional rent was paid for
       the years 1996 or 1995.  

            For the year 1997, professional fees of $1,883,141 incurred
       by the sublessee include $1,481,778 for outside counsel and other
       independent professional firms.  Of this amount, $671,394 was
       incurred for the fees and disbursements of Paul, Weiss, Rifkind,
       Wharton & Garrison in connection with the litigation commenced by
       Donald Trump and foreign investors who purportedly acquired fee
       title to the Empire State Building in 1994, subject to the master
       lease of Empire State Building Associates through January 5, 2076.  

            The distribution from the additional rent is $1,129,063.  In
       accordance with the partnership agreement, 6% of the distribution,
       $67,744, has been paid to Wien & Malkin LLP.  $1,061,319 was
       distributed to participants on March 5, 1998 and represented 3.2%
       of the original cash investment of $33,000,000.  Together with
       regular monthly distributions during the year 1997, total
       distributions to participants for 1997 were at the rate of 15%.
       $1,272,237 will be applied towards the expenses incurred in
       defending the Trump and Studley litigations, about which you have
       been previously advised.  To permit monthly distributions without
       reduction during the improvement program, from 1991 through 1997,
       Wien & Malkin LLP from its own funds has advanced payment for such
       expenses to third party professional firms totalling $647,761
       relating to the Studley litigation and provided services and
       advanced disbursements totalling $624,476 relative to the Trump
       and the Studley litigations on behalf of Associates.<PAGE>
  



                                     
       Re:  Empire State Building Associates                           2.  


            Without the litigation expenses, total distributions to
       participants would have been about 18.62% for the year 1997.  We
       expect both litigations to conclude successfully during 1998.  We
       also expect that the last major component of the improvement
       program, the restoration of the building facade, should be
       substantially complete by the end of 1998.  Without this
       substantial expense, which has been paid entirely from building
       cash flow, the year-end extra distribution to participants for
       1998 will be greater.  

            For financial statement purposes, while the income of Empire
       State Building Associates for the year 1997 was $4,752,560,
       distributions of $4,950,652, including the additional distribution
       of $1,061,319, were made to participants.  The difference is
       treated as a return of capital investment.  It arises mainly
       because of amortization of the leasehold.

            Taking into account that a portion of prior distributions
       constituted a return of capital, the average capital investment
       for the year 1997 was $4,159,108.  Distributions of $4,950,652
       were about 119.0% on the average capital.  The book value on
       December 31, 1997 of an original cash investment of $10,000 was
       $1,391.

            Those participants who have voluntarily authorized additional
       compensation to Wien & Malkin LLP pursuant to the consent
       solicitation letter of September 13, 1991 will receive from Wien &
       Malkin LLP each year through January 5, 2076, their pro rata
       shares of the originally scheduled increases in additional
       payments to Wien & Malkin LLP from the reductions in master lease
       rent effective in 1992 and 2013.  This amounts to $45,017 per
       annum commencing in 1992 and $52,405 per annum commencing in 2013.
       Each such participant holding a $10,000 participation will receive
       each year $13.64 for 1992 through 2012 and $15.88 commencing 2013.
       The first payment to consenting participants on account of the
       year 1992 was included in the check distributed on February 28,
       1993.  The Schedule K-1 previously submitted to you noted the
       amount you received on March 1, 1997 to be reported on your 1997
       income tax returns.  The payment for 1997 was mailed to you on
       March 5, 1998 and will be reportable on your 1998 income tax
       returns.

            Schedule K-1 forms (Form 1065), containing 1997 tax informa-
       tion, were mailed to the participants on March 13, 1998.  

            If you have any question about the enclosed material, please
       communicate with our office.

                                            Cordially yours,

                                            WIEN & MALKIN LLP

                                            By:  Stanley Katzman
       SK:mg
       Encs. <PAGE>




[LETTERHERAD OF
 JACOBS EVALL & BLUMENFELD LLP
 CERTIFIED PUBLIC ACCOUNTANTS]
                              







                     INDEPENDENT ACCOUNTANTS' REPORT



To the participants in Empire State Building Associates (a Partnership):


We have audited the accompanying balance sheet of Empire State Building
Associates ("Associates") as of December 31, 1997, and the related
statements of income, partners' capital and cash flows for the year then
ended.  These financial statements are the responsibility of Associates'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Empire State Building
Associates as of December 31, 1997, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.

As discussed in Note 7 to the financial statements, Associates has been
included as a defendant in actions with other related parties, including
the Agents for Associates and Empire State Building Company, as sublessee. 

                                              Jacobs Evall & Blumenfeld LLP
                                              Certified Public Accountants
                                              420 Lexington Avenue
                                              New York, N. Y. 10170

March 4, 1998

                                    <PAGE>
                        EMPIRE STATE BUILDING ASSOCIATES

                                BALANCE SHEET

                              DECEMBER 31, 1997              





Assets
    Cash and cash equivalents:
         The Chase Manhattan Bank                              $     2,988
         Distribution account held by Wien
             & Malkin LLP                                          324,111
         Fidelity U.S. Treasury Income Portfolio                    51,430
         Additional rent advance account                 
           held by Wien & Malkin LLP                             2,400,000
                                                                 2,778,529
    Additional rent due from Empire
     State Building Company                                          1,300

    Prepaid rent                                                    23,831

    Leasehold on Empire State Building,
     350 Fifth Avenue, New York, N.Y.           $39,000,000
         Less: Accumulated amortization
                 of leasehold                    35,872,958      3,127,042
             Total assets                                       $5,930,702


Liabilities and partners' capital
    Liabilities:
        Accrued supervisory services            $    67,744
        Accrued legal fees                        1,272,237

                                Total liabilities               $1,339,981

	Contingency

        Partners' capital                                        4,590,721

                Total liabilities and partners' capital         $5,930,702




	See accompanying notes to financial statements.

                                    <PAGE>
                        EMPIRE STATE BUILDING ASSOCIATES

                              STATEMENT OF INCOME

                          YEAR ENDED DECEMBER 31, 1997    




Income:

        Basic rent                                               $6,018,750
        Additional rent                                           2,401,300
        Dividend income                                              10,377

             Total income                                         8,430,427


Expenses:

        Leasehold rent                            $1,970,000
        Legal fees                                 1,272,237
        Supervisory services                         227,161

             Total expenses                                       3,469,398

Income before amortization of leasehold                           4,961,029

Amortization of leasehold                                           208,469

Net income							 $4,752,560
                                                              















	See accompanying notes to financial statements.

                                    <PAGE>
                        EMPIRE STATE BUILDING ASSOCIATES

                         STATEMENT OF PARTNERS' CAPITAL

                          YEAR ENDED DECEMBER 31, 1997     




Partners' capital, January 1, 1997                              $ 3,727,494

	Add, Net income for the year ended
         December 31, 1997                                        4,752,560

                                                                  8,480,054
                             											 8,480,054
	Less, Distributions:

               Monthly distributions,
                 January 1, 1997 through December 31, 1997        3,889,333

                Partners' capital, December 31, 1997            $ 4,590,721
                                                             
























	See accompanying notes to financial statements.

                                    <PAGE>
                        EMPIRE STATE BUILDING ASSOCIATES

                           STATEMENT OF CASH FLOWS

                         YEAR ENDED DECEMBER 31, 1997    




Cash flows from operating activities

        Net income                                             $ 4,752,560 

	Adjustments to reconcile net income to
	 cash provided by operating activities:

                Amortization of leasehold                          208,469 
		Changes in operating assets and liabilities:
			Additional rent due from
                         Empire State Building Company              (1,300)
                        Accrued supervisory services                67,744 
                        Accrued legal fees                       1,272,237 

         Net cash provided by operating activities               6,299,710 


Cash flows from financing activities

        Monthly distributions to participants                   (3,889,333)

                 Net cash used in financing activities          (3,889,333)
 
Net increase in cash and cash equivalents                        2,410,377 

Cash and cash equivalents, beginning of year                       368,152 

                 Cash and cash equivalents, end of year        $ 2,778,529 
                                                             








	See accompanying notes to financial statements.

                                    <PAGE>
                        EMPIRE STATE BUILDING ASSOCIATES

                         NOTES TO FINANCIAL STATEMENTS

                             DECEMBER 31, 1997               



1.	Business Activity

	Empire State Building Associates ("Associates") is a general
        partnership which owns the master leasehold on the Empire State
        Building, located at 350 Fifth Avenue, New York City.  Associates
        subleases the property to Empire State Building Company.



2.	Summary of Significant Accounting Policies

		Cash and cash equivalents

		Cash and cash equivalents include investments in money market
                funds and all highly liquid debt instruments purchased with a
                maturity of three months or less.

		Leasehold and amortization

		The leasehold is stated at cost.  In 1988 Associates
                determined that it would exercise its first renewal option
                under the lease, and did so in January 1989.  Amortization of
                the leasehold is being computed by the straight-line method
                over the revised estimated useful life of 25 years, from
                January 1, 1988 to January 5, 2013 (see Note 4).

		Use of estimates

		In preparing financial statements in conformity with generally
                accepted accounting principles, management often makes
                estimates and assumptions that affect the reported amounts of
                assets and liabilities and disclosures of contingent assets and
                liabilities at the date of the financial statements, as well as
                the reported amounts of revenues and expenses during the
                reporting period.  Actual results could differ from those
                estimates.



3.	Rent Income and Related Party Transactions

	The sublease provides for the same first renewal term and additional
        renewal options as the leasehold (see Note 4), less one day.  In
        accordance with the terms of the operating sublease, annual minimum
        net basic rent is $6,018,750 during the first renewal term, and
        $5,895,625 during each of the remaining three renewal terms.
                                    <PAGE>
                        EMPIRE STATE BUILDING ASSOCIATES

                   NOTES TO FINANCIAL STATEMENTS (Continued)



3.	Rent Income and Related Party Transactions (continued)

	Additional rent under the sublease is payable in an amount equal to
        50% of the sublessee's annual net income, as defined, in excess of
        $1,000,000.  Additional rent earned for the year 1997 was $2,401,300. 

	A partner in Associates is also a partner in the sublessee.



4. 	Leasehold Rent

	Pursuant to an operating lease dated December 27, 1961, as modified
        February 15, 1965, with the Prudential Insurance Company of America
        ("Prudential"), leasehold rent represents the net basic rent of
        $1,970,000 per annum for the first renewal term from January 5,
        1992 to January 5, 2013.

	The lease contains options for Associates to renew the leasehold for
        three additional terms of twenty-one years each.  The basic rent is
        to be reduced to $1,723,750 per annum for each of the remaining three
        renewal terms.

	On November 27, 1991, Prudential sold the property to E. G. Holding
        Co., Inc. which, through merger and conveyance, reportedly transferred
        its interest as lessor to Trump Empire State Partners (see Note 7).
        Associates' rights under the master leasehold remain unchanged.



5.	Supervisory Services and Related Party Transactions

	Payments for supervisory services, including disbursements and cost of
        accounting services, are made to the firm of Wien & Malkin LLP.  Some
        members of that firm are partners in Associates.



6.	Income Taxes

	Net income is computed without regard to income tax expense since
        Associates does not pay a tax on its income; instead, any such taxes
        are paid by the participants in their individual capacities.


                                     <PAGE>
                        EMPIRE STATE BUILDING ASSOCIATES

                    NOTES TO FINANCIAL STATEMENTS (Continued)


7.	Litigation, Legal Fees and Related Party Transactions

        a. On October 21, 1991, in an action entitled Studley v. Empire State
           Building Associates et al., the holder of a $20,000 original
           participation in Associates brought suit in New York Supreme Court,
           New York County against the Agents for Associates (Peter L. Malkin,
           Donald A. Bettex and Alvin Silverman), in their individual
           capacities and Wien, Malkin & Bettex (currently "Wien & Malkin
           LLP"), counsel to Associates.  The suit claims that the
           defendants had engaged in breaches of fiduciary duty and acts of
           self-dealing in relation to the Agents' solicitation of consents
           and authorizations from the participants in Associates in September
           1991 and in relation to other unrelated acts of the Agents and the
           sublessee.  By order dated July 14, 1997, the Court granted
           defendants' application for summary judgment and dismissal of the
           action.  Plaintiff's appeal of the dismissal is pending.  Associates
           is a nominal defendant and the complaint does not seek any direct
           relief from it; accordingly, no loss or other unfavorable outcome of
           the action against Associates is anticipated.

        b. In December 1994, Associates received a notice of default from Trump
           Empire State Partners ("Trump").  The Trump default notice to
           Associates claims that Associates was in violation of its master
           lease because of extensive work which the sublessee, Empire State
           Building Company ("Company"), had undertaken as part of an
           improvement program that commenced before Trump reportedly acquired
           its interest In the property in 1994.  Trump's notice also complains
           that the building is in need of repairs.  On February 14, 1995,
           Associates and Company filed an action in New York State Supreme
           Court against Trump for a declaratory judgment that none of the
           matters set forth in the notice of default constitutes a violation
           of the master lease or sublease, and that the notice of default is
           entirely without merit.  Associates' and Company's suit also seeks
           an injunction to prevent Trump from implementing the notice of
           default.  On March 24, 1995, the Court granted Associates a
           preliminary injunction against Trump.  In 1996 the Court granted
           two additional injunctions against Trump with respect to two
           additional default notices.  The preliminary injunctions
           prohibit Trump from acting on its notices of default to Associates
           at any time, pending the prosecution of claims by Associates and
           Company for a final declaratory judgment and an injunction and other
           relief against the Trump defendants.  The Appellate Court has upheld
           and affirmed the granting of such preliminary injunctions against
           the Trump defendants.

           On February 15, 1995, Trump filed an action against Associates,
           Company, Wien & Malkin LLP, Harry B. Helmsley, a partner in
           Company, Helmsley-Spear, Inc. (the management company of the
           Empire State Building), and the Agents for Associates in New
           York State Supreme Court, alleging that the notice of default is
           valid and seeking damages and related relief based thereon.  On
           October 24, 1996 the Court dismissed all of Trump's claims in their
           entirety against all defendants in the action.  Trump appealed this
           Order.  The Appellate Court has unanimously affirmed the dismissal
           of Trump's claims.
                                 <PAGE>
                        EMPIRE STATE BUILDING ASSOCIATES

                    NOTES TO FINANCIAL STATEMENTS (Continued)


7.	Litigation, Legal Fees and Related Party Transactions (continued)

        In May 1995, Associates and Company filed a separate legal action
        against Trump and various affiliated persons for breach of the master
        lease and sublease, and disparagement of the property in violation of
        Associates' and Company's leasehold rights.  The action was amended
        to include additional claims by Associates and Company seeking a
        declaratory judgment that they may act as an owner of the Property
        for purposes of making applications and related activities pursuant
        to the New York City Building Code.  By decision and order dated
        October 24, 1996, the Court sustained Associates' and Company's
        claims concerning the parties who may act as owner of the Property
        under the Building Code, but dismissed Associates' and Company's
        claims against Trump and co-defendants for money damages.
        Associates and Company appealed that portion of the Court's order
        dismissing their claims for money damages.  The Appellate Court
        has affirmed that part of the Court's order dismissing the claims
        for money damages.

        c. Associates is a defendant in an action instituted in the Supreme
        Court of the State of New York, County of New York, entitled New
        York Skyline Inc. v. Empire State Building Company, Empire State
        Building Associates, Neil H. Kessner, Helmsley-Spear, Inc. and
        Stephen A. Tole.  This lawsuit, which was brought by a tenant in
        the Building and was filed on December 23, 1997, seeks at least
        $205,000,000 in damages.  In its complaint, plaintiff-tenant asserts
        thirteen causes of action (twelve of which are against Company) in
        connection with its leases and license agreements of space in the
        Building and alleges that it is entitled to, among other things,
        specific performance as to its alleged rights under its leases and
        licensing agreements with Company, a declaratory judgment as to the
        rights of the parties under the leases and licensing agreements,
        any monies allegedly due plaintiff under those agreements, as well
        as injunctive relief and additional money damages.  While the complaint
        includes Associates as a named defendant, it does not allege or
        identify any agreement between plaintiff and Associates or any
        other basis of liability on Associates' part to plaintiff. 

        On or about February 5, 1998, plaintiff served an amended complaint
        which, among other things, added Kessner & Cyruli, f/n/a Nell H.
        Kessner & Associates, former landlord-tenant counsel for the Building,
        and Eileen Aluska, a former Helmsley-Spear, Inc. employee, as party
        defendants.  The amended complaint asserts eleven causes of action,
        similar to thoseasserted in the original complaint.

        Associates has until March 16, 1998 to answer or make a motion with
        respect to the amended complaint.  Associates intends to contest the
        case vigorously.

        Because the action is still in the pleading stage and pre-trial
        discovery has not yet started, counsel for Associates has not formed a
        professional conclusion that an adverse outcome is either probable or
        remote.
                                 <PAGE>
                             EMPIRE STATE BUILDING ASSOCIATES

                        NOTES TO FINANCIAL STATEMENTS (Continued)



7.	Litigation, Legal Fees and Related Party Transactions (continued)

	The accompanying statement of income reflects an expense of $1,272,237
        and the accompanying balance sheet reflects a corresponding accrued
        liability of $1,272,237 for reimbursement to the Agents from Associates
        of their legal and accounting expenses relating to the Studley and
        Trump suits.  Through December 31, 1997, legal and accounting expenses
        in connection with the Studley suit amounted to $960,065 of which
        $647,761 has been advanced by Wien & Malkin LLP, counsel (a related
        party), to third party professional firms and $312,304 represents
        accumulated professional time of Wien & Malkin LLP.  Counsel has
        advised that its records at December 31, 1997 also indicate
        $312,172 in accumulated professional time and disbursements related
        to the Trump suits. Substantial additional legal and accounting costs
        may be incurred in both suits.

	The determination of the allocable share of the net legal and
        accounting costs and disbursements accrued by Associates that are
        chargeable to Company involve complex issues of fact and law.
        Therefore, although Associates may be entitled to indemnification
        from Company, because of uncertainties concerning these issues, amounts
        for professional fees to be reimbursed to Associates cannot be
        estimated, and consequently, have not been provided for in the
        accompanying financial statements. 



8.	Concentration of Credit Risk

	Associates maintains cash balances in a bank, money market fund
        (Fidelity U.S. Treasury Income Portfolio), additional rent advance
        account held by Wien & Malkin LLP (which was transferred to the money
        market fund in January 1998) and a distribution account held by Wien &
        Malkin LLP.  The bank balance is insured by the Federal Deposit
        Insurance Corporation up to $100,000, and at December 31, 1997 was
        completely insured.  The cash in the money market fund and the two
        accounts held by Wien & Malkin LLP are not insured.  The funds held
        in the distribution account were paid to the participants on
        January 1, 1998.

 

                                 <PAGE>

                                  


[LETTERHEARD OF
MCGRATH, DOYLE & PHAIR
CERTIFIED PUBLIC ACCOUNTANTS]



                                     

  Empire State Building Company
  60 East 42nd Street
  New York, NY  10165

        We have audited the accompanying Comparative Combined Statement of
  Income of Empire State Building and Observatory for the years ended December
  31, 1997 and 1996 for the purpose of determining "Net Operating Profit" and
  "Overage Rent" as thoseterms are defined in Section 2.05 of Agreement of
  Sublease dated December 27, 1961.  During the years ended December 31, 1997
  and 1996, the entire building, with the exception of the Observatory, was
  operated by Empire State Building Company and the Observatory was operated
  by Empire State Building, Inc.  The Combined Statement of Income is the
  responsibility of the management of Empire State Building Company and Empire
  State Building, Inc.  Our responsibility is to express an opinion on the
  Combined Statement of Income based on our audit.

	We conducted our audit in accordance with generally accepted auditing
  standards.  Those standards require that we plan and perform the audit to
  obtain reasonable assurance about whether the Combined Statement of Income is
  free of material misstatement.  An audit includes examining, on a test basis,
  evidence supporting the amounts and disclosures in the statement.  An audit
  also includes assessing the accounting principles used and significant
  estimates made by management, as well as evaluating the overall presentation
  of the Combined Statement of Income.  We believe that our audit provides a
  reasonable basis for our opinion.

	In our opinion, the accompanying Comparative Combined Statement of
  Income of Empire State Building and Observatory presents fairly, in all
  material respects, the Net Operating Profit and Overage Rent for the years
  ended December 31, 1997 and 1996, in conformity with Section 2.05 of the
  aforementioned Agreement dated December 27, 1961.

	As discussed in Note 3 to the Combined Statement of Income, the Empire
  State Building Company and other related parties have been named as
  defendants in legal actions.  All defendants have denied all material
  allegations.  It is not possible at this time to predict the outcome or range
  of potential loss, if any, which might result from those actions.  No
  provision for any loss has been made in the accompanying Combined Statement
  of Income.




  New York, NY
  February 23, 1998<PAGE>




 



 

 


                        Empire State Building and Observatory
                       COMPARATIVE COMBINED STATEMENT OF INCOME

                                                                    Increase
                                                   1997       1996 (Decrease)
INCOME
 Rent, including electricity                $53,800,622 $52,196,949 $1,603,673
 Observatory admissions                      16,378,777  12,317,087  4,061,690
 Other observatory income                     1,194,070   1,098,580     95,490
 Antenna rent                                 5,442,661   5,280,773    161,888
 Lease cancellation                             113,919       6,409    107,510
 Percentage rent                                625,929     456,780    169,149
 Other                                          879,686     592,370    287,316
 Total income                                78,435,664  71,948,948  6,486,716

OPERATING EXPENSES
 Rent                                         6,018,749   6,018,750         (1)
 Real estate taxes                           19,766,635  20,748,418   (981,783)
 Wages, contract cleaning and protection ser 11,808,525  11,067,231    741,294
 Electricity                                  4,745,390   4,712,758     32,632
 Tenants' and building alterations, repairs  12,528,746  18,953,112 (6,424,366)
 Management fees and leasing commissions
 (Note 4)                                     2,872,332   3,100,637   (228,305)
 Observatory:
  Wages                                       1,767,377   1,521,091    246,286
  Contracted  security                        2,139,784     180,402  1,959,382
  Advertising and public relations              228,608     265,777    (37,169)
  Payroll taxes and other labor cost            558,923     468,322     90,601
  Other taxes and expenses                      216,517     189,715     26,802
 Steam                                        1,455,313   1,442,483     12,830
 Professional fees (Note 2)                   1,883,141   3,091,938 (1,208,797)
 Payroll taxes and other labor costs          3,265,122   3,112,192    152,930
 Insurance                                      725,396     768,538    (43,142)
 Water (1995 - 1997)                            959,828     172,498    787,330
 Rubbish removal                                463,205     679,281   (216,076)
 Advertising                                    331,726     396,172    (64,446)
 Telephone                                       69,572      71,624     (2,052)
 Fire alarm service                              18,955     203,510   (184,555)
 Directory service                                5,072      25,732    (20,660)
 New York State utility taxes (1987-1992)
 (Note 4)                                             0     979,109   (979,109)
 Interest on NYS  utility tax (Note 4)          127,811     681,688   (553,877)
 Utility and vault taxes                        261,128     322,648    (61,520)
 Paging and other intercommunication            108,499      78,739     29,760
 Dues                                            35,719      61,213    (25,494)
 Licenses and permits                             3,366      16,721    (13,355)
 Other expenses                                 267,624     532,681   (265,057)
 Total expenses before overage rent          72,633,063  79,862,980 (7,229,917)

NET OPERATING PROFIT (LOSS)                  $5,802,601 $(7,914,032)$13,716,633

OVERAGE RENT, 50% OF NET OPERATING PROFIT
 IN EXCESS OF $1,000,000                     $2,401,300          $0  $2,401,300

                     (See notes to combined statements of income)<PAGE>

                        Empire State Building and Observatory
                        NOTES TO COMBINED STATEMENT OF INCOME

NOTE

1.   Management fees and leasing commissions for the years 1997 and 1996 were
     paid to companies in which a partner in Empire State Building Company
     ("Company"), had a controlling interest.

2.   Professional fees include payments to Wien & Malkin LLP.  A partner in
     Wien & Malkin LLP is a partner in Company.

3.   Litigation

     (a) On October 21, 1991, Julien J. Studley ("Studley"), the holder of a
     $20,000 original participation in Empire State Building Associates
     ("Associates"), the master lessee of the Empire State Building, brought
     suit against the Agents for Associates (Peter L. Malkin, Donald A. Bettex
     and Alvin Silverman); Company; Harry B. Helmsley, a partner in Company;
     and Wien, Malkin & Bettex, counsel to Associates. The suit claimed that
     the defendants have engaged in breaches of fiduciary duty and acts of
     self-dealing in relation to the Agents' solicitation of consents and
     authorizations of the Participants in Associates in September, 1991, and
     in relation to other unrelated acts of the Agents and the Sublessee.  The
     suit is styled as a class action, but the Court was not asked to grant
     class certification.  The suit seeks relief including an injunction and an
     accounting. In 1994, the action was dismissed against Company and Mr.
     Helmsley.  In 1995, the plaintiff amended the complaint to allege, amongst
     other things, the underpayment by Company of overage rent due to
     Associates. In June 1996, plaintiff applied for partial summary judgment.
     In September 1996, defendants applied for summary judgment and dismissal
     of the action in its entirety.  By order and decision dated July 14, 1997,
     the Court denied the plaintiff's motion for partial summary judgment,
     granted the defendants' motion for summary judgment, and dismissed the
     action.  Plaintiff appealed that determination and the appeal is pending.
     It is not possible at this time to predict the outcome or range of
     potential loss, if any, which results from this action.  No provision for
     any liability that may result upon adjudication has been made in the
     accompanying financial statements.

     (b) In December 1994, Empire State Building Associates ("Associates")
     received a notice of default from Trump Empire State Partners ("Trump").
     The Trump default notice to Associates claims that Associates is in
     violation of its master lease because of extensive work Company has
     undertaken as part of an improvement program that commenced before Trump
     reportedly acquired its interest in the property in 1994.  Trump's notice
     also complains that the building is in need of repairs. 

     On February 14, 1995, Associates and Company filed an action in the New
     York State Supreme Court against Trump for a declaratory judgment that
     none of the matters set forth in the notice of default constitutes a
     violation of the master lease or sublease, and that the notice of default
     is without merit.  Associates' and Company's suit also seeks an injunction
     to prevent Trump from implementing the notice of default.

     On March 24, 1995, the New York State Supreme Court, in the foregoing
     action, granted Associates a preliminary injunction against Trump.  Trump,
     thereafter, served two additional default notices for which the Court had
     granted additional injunctions against Trump. (See discussion below).<PAGE>
 


                                                                          

                        Empire State Building and Observatory
                        NOTES TO COMBINED STATEMENT OF INCOME

NOTE 

3.   Litigation (Continued)

     (b) (Continued)
	
     The injunctions prohibit Trump from acting on its notices of default to
     Associates, at any time, pending the prosecution of claims by Associates
     and Company for a final judgment granting a permanent injunction and other
     relief against the Trump defendants.  On April 8, 1996, the Court granted
     Associates additional injunctions against Trump, which further prohibit
     Trump from seeking to terminate Associate's Master Lease.  On August 19,
     1996, the Court denied a motion by Trump to set aside the injunction
     granted in favor of Associates and against Trump on March 24, 1995.  The
     Court has directed the parties in the foregoing action to proceed with
     pretrial discovery.  Trump has appealed the Court's injunction orders, and
     the Appellate Court has unanimously affirmed the appealed orders.

     On February 15, 1995, Trump filed an action against Associates, Company,
     Counsel, Harry B. Helmsley, Helmsley Spear, Inc. (the management company
     of the Building engaged by Company), and the Partners, in New York State
     Supreme Court, alleging that the notice of default is valid and seeking
     damages and related relief based thereon.  On October 24, 1996, the Court
     dismissed all of Trump's claims in their entirety as against Associates
     and all other defendants in the foregoing action.  Trump appealed this
     ruling and the Appellate Court unanimously affirmed dismissal of Trump's
     claims.

     In May 1995, Associates and Company filed a separate legal action against
     Trump and various affiliated persons for breach of the Master Lease and
     Sublease and for disparagement of the property in violation of Associates'
     and Company's leasehold rights.  The action was amended to include
     additional claims by Associates and Company seeking a declaratory judgment
     that they may act as an owner of the Property for purposes of making
     applications and related activities pursuant to the New York City Building
     Code.  Trump moved to dismiss the claims concerning the Building Code.  By
     decision and order of October 24, 1996,  the Court rejected Trump's motion
     and sustained Associates' and Company's claims concerning the parties who
     may act as owner of the Property under the Building Code.  The Court
     directed that the claims should proceed to trial.  At the same time, the
     Court dismissed Associates' and Company's claims against Trump and co-
     defendants for money damages.  The Appellate Court has affirmed that
     portion of the Court's order dismissing the claims for money damages.  

     In connection with the Studley and Trump litigations, Associates may be
     entitled to reimbursement of its legal and accounting expenses from
     Company.  Through December 31, 1997, such legal and accounting expenses
     in connection with the Studley suit have amounted to $960,065, of which
     $647,761 has been advanced by Wien & Malkin LLP, counsel (a related
     party), to third-party professional firms, and $312,304 represents
     accumulated professional time of  Wien & Malkin LLP.  In addition,
     counsel has advised that its records at December 31, 1997 indicate
     $312,172 in accumulated professional time and disbursements related
     to the Trump suits.
     Substantial additional legal and accounting costs may be incurred in both
     cases.

     The determination of the allocable share of the net legal and accounting
     costs and disbursements chargeable to Company involve complex issues of
     fact and law. Because of uncertainties concerning these issues, an amount
     for professional fees payable by Company cannot be estimated, and
     therefore, have not been provided for.  Resolutions unfavorable to Company
     could result in material liabilities and charges which have not been
     reflected in the accompanying financial statements.<PAGE>


                        Empire State Building and Observatory
                        NOTES TO COMBINED STATEMENT OF INCOME

NOTE 

3.   Litigation (Continued)

     (c) Company is a defendant in an action instituted in the Supreme Court of
     the State of New York, County of New York, but transferred down to the New
     York City Civil Court, entitled Robert D. Gould P.C. v. Empire State
     Building Company, et al. This lawsuit, which is brought by a tenant in the
     building, seeks $5,000,000 in damages for an alleged breach of lease and
     tortious conduct.  The Supreme Court entered an order precluding plaintiff
     from proving damages by reason of its failure to serve an adequate bill of
     particulars. Plaintiff's motion to vacate the order of preclusion was
     denied, and its time to appeal from the order of preclusion expired.
     Because plaintiff is precluded from proving damages,  the action has been
     transferred to the New York City Civil Court.  Plaintiff has taken no step
     to prosecute the case subsequent to the transfer.  The case has been
     dormant since 1996.

     (d) Company is a defendant in an action pending in the United States
     District Court for the Southern District of New York, entitled R. Gene
     Smith and Turbo Vision Limited Partnership vs. Neil H. Kessner, Richard
     C. O'Conor, Neil H. Kessner and Associates, Steven M. Durels, The Empire
     State Building Company and Stephen A. Tole.  This lawsuit, which is
     brought by the principals of a tenant in the Empire State Building,
     alleges various claims for damages against the six named defendants in
     connection with plaintiffs' alleged construction and operation of an
     entertainment facility in the building.  As against the Company,
     plaintiffs allege fraudulent inducement in connection with matters
     pertaining to the making of a lease agreement in connection with the
     foregoing entertainment facility, and to the construction and operation
     of the foregoing entertainment facility; and breach of the covenant of
     quiet enjoyment contained in the lease, which was entered into in
     connection with the foregoing entertainment facility.  Plaintiffs allege
     that they expended funds and incurred future liabilities in connection
     with the construction and operation of the foregoing entertainment
     facility, and on each of their claims against the Company, plaintiffs
     allege damages in an amount not less than $5,000,000 and punitive
     damages in an amount not less that $10,000,000 (together with interest,
     attorney's fees, and the costs and disbursements of the action).
  
     The Company has denied the material allegations of the complaint against
     it and has asserted various affirmative defenses.  The Company has also
     asserted a cross-claim against defendant Stephen A. Tole for indemni-
     fication and/or contribution for the entire amount of any damages awarded
     in plaintiffs' favor against the Company, as well as a cross-claim against
     defendants Tole, Neil H. Kessner, Richard C. O'Conor, Steven M. Durels and
     Neil H. Kessner and Associates, jointly and severally, for contribution
     and/or indemnification for part or all of any such damages.  The Company
     has furthermore filed a third-party complaint against Helmsley-Spear,
     Inc., as an agent of the Company and the employer of defendant Tole,
     asserting claims for indemnification, contribution and/or respondeat
     superior for the entire amount, or part thereof, of any damages awarded
     in plaintiffs' favor against the Company.  The co-defendants and the
     third-party defendant have denied the material allegations of the cross-
     claims and third-party complaint.

     The Company intends, and has begun, to defend the action vigorously.  The
     action is presently at a discovery stage, and counsel is not able to
     express an opinion as to the likely outcome or to estimate amounts or a
     range of potential losses or gains.<PAGE>
 


                        Empire State Building and Observatory
                        NOTES TO COMBINED STATEMENT OF INCOME

NOTE 

3.   Litigation (Continued)

     (e) Company is a defendant in an action instituted in the Supreme Court of
     the State of New York, County of New York, entitled New York Skyline Inc.
     v. Empire State Building Company, Empire State Building Associates, Neil
     H. Kessner, Helmsley-Spear, Inc. and Stephen A. Tole.  This lawsuit which
     is brought by a tenant in the building and commenced on December 23, 1997
     seeks at least $205,000,000 in damages.  In its complaint, plaintiff-
     tenant asserts thirteen causes of action (twelve of which are against the
     Company) in connection with its leases and license agreements of space in
     the Building and alleges that it is entitled to, among other things,
     specific performance as to its alleged rights under its leases and
     licensing agreements with the Company, a declaratory judgment as to the
     rights of the parties under the leases and licensing agreements as well as
     any monies allegedly due plaintiff under those agreements, as well as
     injunctive relief and additional money damages.

     The Company served papers opposing the plaintiff's motion.  Oral argument
     on the motion was held on February 6, 1998.  The motion is sub judice for
     a preliminary injuction and related relief. 

     On or about February 5, 1998, plaintiff served an amended complaint which,
     among other things, added Kessner & Cyruli, f/n/a Neil H. Kessner &
     Associates, former landlord-tenant counsel for the building, and Eileen
     Aluska, a former Helmsley-Spear, Inc. employee, as party-defendants.  The
     amended complaint asserted eleven causes of action against the Company,
     similar to those asserted in the original complaint.

     The Company has until March 16, 1998 to answer or make a motion with
     respect to the amended complaint.  The Company intends to contest the case
     vigorously.

     Counsel for Company has not formed a professional conclusion that in the
     action an adverse outcome is either probable or remote.  It is not
     possible at this time to predict the outcome or range of potential loss,
     if any, which results from this action.  No provision for any liability
     that may result upon adjudication has been made in the accompanying
     financial statements.

4.   Liabilities

     The State of New York has asserted utility tax deficiencies of $1,528,816
     through December 31, 1992 in connection with water, steam and non-metered
     electricity rent inclusion charges to tenants, plus estimated accrued
     interest of $797,713.

     The Supreme Court, New York County has granted summary judgment in favor
     of the State, holding that the State utility tax applies to such rent
     inclusion charges.  The ruling was affirmed by the Appellate Division.
     Company sought permission to appeal the Appellate Division's decision and
     order to the Court of Appeals.  The Court of Appeals denied Company's
     motion. In May, 1996, Company entered into a settlement agreement with the
     State.  Pursuant to the terms of the settlement agreement, Company agreed
     to pay the State $979,109, plus interest of approximately $605,000 through
     July 31, 1996.  The State has agreed to payment of the aforesaid liability
     over a period of four years, commencing August, 1996, in equal monthly
     installments of $40,000, including interest on the unpaid balance at the
     statutory rate. Installment payments to the State of $40,000 per month
     have been made by Company commencing on August 1, 1996.  It is
     anticipated that New York State will seek to impose liability on Company
     for State utility tax for periods after December 31, 1992. The amount of
     such additional tax has yet to be determined.<PAGE>


                        Empire State Building and Observatory
                        NOTES TO COMBINED STATEMENT OF INCOME

NOTE 

4.   Liabilities (Continued)

     The City of New York has asserted a utility tax deficiency in the amount
     of $277,125 against Company, through December 31, 1994, in connection with
     water, steam and non-metered electricity rent inclusion charges to
     tenants, plus accrued interest of approximately $163,012 through December
     31, 1997.  Company is contesting the calculation of the City's proposed
     utility tax deficiency before the New York City Tax Appeals Tribunal.
     The final outcome of Company's appeal cannot presently be determined.
     It is anticipated that New York City will seek to impose liability on
     Company for additional New York City utility tax for periods after
     December 31, 1994.  The amount of such additional tax has yet to be
     determined.<PAGE>